The Facts on Raising the Minimum Wage

Pedro Rodriguez, right, talks with Andrus Reyes as they participate in a demonstration on a Burger King parking lot as part of a nationwide protest supporting higher wages for workers in the fast-food industry and other minimum wage jobs in Boston, Thursday, Dec. 5, 2013. (AP Photo/Stephan Savoia)

And even if you break your back working in today’s low-wage economy, it’s exceedingly difficult to raise yourself up by the bootstraps; it’s all but impossible to put yourself through school or save enough money to start a business if you’re making anything close to $7.25 an hour.

But those predisposed to defending the interests of corporate America – including retailers and fast-food restaurants – oppose any increase. That’s tough given that 73 percent of Americans – including 53 percent of registered Republicans – favor hiking the minimum to $10.10 per hour, according to a Pew poll conducted in January.

So those opposed to giving low-income workers a raise offer a number of claims suggesting it would be a supposedly bad idea. Unfortunately for their cause, all of their arguments fall apart under close scrutiny. Here are the ones deployed most frequently.

“It’s a monstrous job-killer”

Big business conservatives crowed when a recent report by the Congressional Budget Office (CBO) projected that a hike to $10.10 might cost the economy 500,000 jobs – never mind that it would have raised the incomes of around 17 million Americans. But a number of economists disputed the CBO finding. One of them, John Schmitt from the Center for Economic and Policy Research, studied years of research on the question, and found that the “weight of that evidence points to little or no employment response to modest increases in the minimum wage.”

We also have real-world experience with higher minimums. In 1998, the citizens of Washington State voted to raise theirs and then link future increases to the rate of inflation. Today, at $9.32, the Evergreen State has the highest minimum wage in the country – not far from the $10.10 per hour proposed by Barack Obama. At the time it was passed, opponents promised it would kill jobs and ultimately hurt the workers it was designed to help.

But it didn’t turn out that way. This week, Bloomberg’s Victoria Stilwell, Peter Robison and William Selway reported: “In the 15 years that followed… job growth continued at an average 0.8 percent annual pace, 0.3 percentage point above the national rate. Payrolls at Washington’s restaurants and bars, portrayed as particularly vulnerable to higher wage costs, expanded by 21 percent. Poverty has trailed the U.S. level for at least seven years.”

“It will hurt mom-and-pop businesses”

Another argument is that it would disproportionately hurt small businesses – giving the Wal-Marts of the world an unfair advantage over mom and pop. But a poll of 500 small business owners from across the country released on Thursday undermines that talking point. The survey, conducted by Greenberg Quinlan Rosner Research for Small Business Majority, found that small business owners support a hike to $10.10 per hour by a 57-43 margin. Eighty-two percent of those surveyed say they already pay their employees more than the minimum and 52 percent agreed that if the wage floor is raised, “people will have a higher percentage of their income to spend on goods and services” and small businesses “will be able to grow and hire new workers.”

“Major costs will be passed along to consumers”

Opponents also claim that higher wages would mean significantly higher prices and that those cost increases would effectively eat up whatever extra earnings low-wage workers ended up taking home. But a 2011 study conducted by Ken Jacobs and Dave Graham-Squire at the UC-Berkeley Center for Labor Research and Education and Stephanie Luce at CUNY’s Murphy Institute for Worker Education and Labor Studies estimated that raising the minimum wage to $12 per hour – two bucks more than what’s currently on the table – would increase the cost of an average shopping trip to Wal-Mart by just 46 cents – or around $12 per year. And another paper published last September by economists Jeannette Wicks Lim and Robert Pollin estimated that a hike to $10.50 an hour would likely result in the price of a Big Mac increasing by only a dime, from $4.50 to $4.60, on average.

If the minimum wage had kept pace with inflation since its peak value in 1968, it would now stand at $10.74 per hour. With the share of our nation’s output going to workers’ wages at an all-time low — and inequality on the rise — it’s easy to understand why the idea of raising it to $10.10 is so popular. And despite opponents’ dire warnings, there’s really no good reason that we shouldn’t do so.

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